Satisfy annual demand, Suppose you purchase a $4 -per-unit

Satisfy annual demand

Reference no: EM13331986

Suppose you purchase a $4 -per-unit part from a supplier with which you assemble red widegets. On average, you use 50000 units of this part each year. Every time you order this part, you incur a sizable order cost of $800 regardless of the number of parts you order. Your cost of capital is 20% per year.

a) How many parts should you purchase each time you place an order?
b) To satisfy annual demand, how many times per year will you place orders for this part?

Reference no: EM13331986

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